Insull & Pennies

One day last December newshawks discovered Samuel Insull in a suite of offices on the 42nd floor of that famed Insull monument, Chicago's Civic Opera Building. Dressed in cutaway and striped trousers, the white-crested utilitarian was about to take a familiar chair at the head of a long directors' table, carefully laid with pads & pencils. Between puffs on his cigar, Mr. Insull announced that he had nothing to say--"yet." But what he was up to was no secret. At 76, he was getting into radio broadcasting (TIME, Jan. 6). Last week the Insull venture was formally chartered by the State of Illinois as Affiliated Broadcasting Co. with paid-in capital of $100,000. Floyd E. Thompson, the lawyer who obtained Mr. Insulls acquittal on fraud charges in connection with the fall of Middle West Utilities, explained that his client was only a "hired president." "He will act also as general manager," said Lawyer Thompson. "He is at work now completing the organization, gathering assistants together." Some 15 local radio stations in Illinois, Indiana and Wisconsin have already been signed up. Mainspring of the Insull chain is Ota Gygi, one-time court violinist to Spain's Alfonso XIII and promoter of Ed Wynn's defunct Amalgamated Broadcasting Co. According to Lawyer Thompson, President Insull "hasn't got a dollar in the company; he didn't have a dollar to put in." One sure sign of broadening popular interest in stockmarket speculation is booming activity in so-called "penny stocks," which are shares selling below $1. Most active issue on the New York Curb Exchange last week was U. S. Electric Power warrants, entitling the holder to buy one share of the company's common at $25. The common, also active, sells at about 75-c- per share. Nearly 500,000 of U. S. Electric Power warrants changed hand last week at about 9-c- each. Another favorite with penny-stock traders has been Insull's old Middle West Utilities, 500,000 shares changing hand the week before at prices as high as 37 1/4-c- per share. The stock's only value lies in the fact that it may be swapped for stock in the reorganized company, Middle West Corp. The exchange basis is 100 shares of old stock for one share of new. Thus a person who bought 100 shares of old Middle West for $37.50 was in effect buying one share of the new stock, which can be bought for around $9.50.*Alarmed by the penny-stock traders' determination to make suckers out of themselves, Middle West's trustees last week sought and obtained court permission to stop transferring the old stocks on the company's books. Following their usual practice of dropping an issue as soon as a company fails to maintain transfer facilities, both the New York Curb Exchange and the Chicago Stock Exchange promptly suspended trading in Middle West stocks.

/-An exaggeration. Samuel Insull receives $21,000 per year in pensions from his old Chicago operating companies. *Similar discrepancies exist in the prices of old securities and reorganization securities of Baldwin Locomotive and Burns Bros., big Eastern Coal distributor.

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